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Power Crisis: California ISO Spokeswoman Discusses Efforts to Avert Blackouts; Dairy Industry Operating 'On the Edge'

Aired January 23, 2001 - 2:03 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: Another story we are closely watching is the power crisis out West today. California looked like it was headed for another day of scattered outages, but quicker than you can say "lights out," the state was able to buy extra electricity from Canada. That apparently will keep customers juiced today, averting rolling blackouts.

The power crunch intensified this week when utilities hit the limit on so-called "interruptible customers." Those customers agree to outages during tight supply times in exchange for lower rates -- excuse me -- but their shutdown time was used up during outages last week.

And let's talk with Lorie O'Donley. She's with the California Independent Systems Operator, the people in charge of the state's power system.

Lorie, how close did you come to blackouts again today?

LORIE O'DONLEY, CALIFORNIA ISO: Hi, Natalie. Listen, I just kind of have an updated situation out here in that, basically, we're kind of on an hour-to-hour basis again. We were able to secure some resources this morning. Those resources will be available tonight for our peek. But, actually, our folks are kind of crunching the numbers right now to see if we're going to be able to maintain keeping the lights on all afternoon.

ALLEN: It sounds like you're still hanging by a thread there, Lorie.

O'DONLEY: Yes, you know, the -- it's just the situation in all of the West. There's just a real shortage.

ALLEN: And how long could you be in such an hour-to-hour time frame here?

O'DONLEY: Oh, well, we've been doing it for more than a week now, so...

(LAUGHTER)

... you know, we're hopeful that the legislature -- state legislature is trying to get some relief here, and we're hopeful that they'll be able to set us up this week.

ALLEN: Is that the only recourse at this point to get out of this situation?

O'DONLEY: Yes, in the short term we really have to -- I think the most major concern is the, you know, the creditworthiness, the utilities, that kind of a thing. So we really need some resolution on that issue.

ALLEN: Any idea, if you do have to go to blackouts again, how many people we're talking about being affected?

O'DONLEY: We're talking, again, about it just being in the Northern California area. And, basically, that's because of hydro shortages both in Northern California and the Pacific Northwest.

ALLEN: OK.

O'DONLEY: (OFF-MIKE) up here from the south.

ALLEN: OK, Lorie, thanks so much. It sounds like your cell phone needs some juice as well. Lorie O'Donley, she's got a tough job these days. And, again, as you heard, they're going on an hour-to- hour basis there in that part of California, trying to avert anymore blackouts.

We'll continue to watch that story as well.

For more, here's Lou.

LOU WATERS, CNN ANCHOR: You may be watching all this in Cincinnati or Shreveport or other places out East and think to yourself as you're snug as a bug, that's too bad for California, but it doesn't affect me. Think again. Here's one example: California produces a fifth of the country's milk, a $4-billion-a-year industry for that state. And when dairy farms shut down because they are out of power, the cost of milk is going to go up eventually.

Jim Gomes joins us on the line from Fresno. He's with the California Dairies.

Jim, we understand the rolling blackouts are confined to Northern California. Is it affecting California dairies there?

JIM GOMES, CALIFORNIA DAIRIES, INC.: Yes, it is. We have three plants in Northern California and two in Southern California district.

WATERS: And this -- I just mentioned that California produces a fifth of the country's milk, a $4 billion industry. How will this affect the rest of the country?

GOMES: Well, certainly it will at some point. At this juncture it's, you know, California's a huge exporter of butter, powder and cheese, manufactured dairy products that go to the rest of the nation and to the world, for that matter. And...

WATERS: How is that affecting your industry right now? What's happening?

GOMES: Well, it makes it obviously very difficult to operate. Hour by hour, you don't know whether the power is going to be on or off. And the power that we are getting, at least in the form of natural gas, is much more expensive. And electric will be much more expensive when the true costs are rippled to us. Right now, the utilities are mandated to charge at a fixed-cap level, which we realize is not capturing all the costs and putting them in dire straits.

WATERS: Can you give us an idea of a typical day at a dairy farm without power? What are the dangers for the animals and what are the problems that result as this rolling blackout continues?

GOMES: Well, on the farm it's mostly a situation of higher costs. Most of the large farms out here have portable generators where they can continue to milk cows and maintain their operations. However, the farmer is incurring a situation where if the processing plant can't take the milk, then the milk, you know, he has no home if the truck doesn't arrive to haul the milk to the processing plant. And so that's been a precarious situation. All last week we were on the edge. Fortunately, we did not have to turn away any milk in our facilities, but it was close.

WATERS: All right, good luck to you, Jim Gomes, from Fresno with the California Dairies. We'll keep close watch on that situation.

Natalie, what's next?

GOMES: Very good.

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